Global Economic Growth to Slow: NIESR

The world economy will grow by 3 per cent in 2015 – the slowest rate since the crisis – and 3.5 per cent in 2016.

Emerging market economies have slowed, while recoveries remain hesitant in most developed countries.

Growth may be boosted by delayed effects of lower oil prices, as well as by accommodative monetary policy and slower fiscal consolidation, but considerable risk remains.

NIESR identifies the Greek economy as a key risk to global growth. however Greek economy is on a path of moderate recovery and the Euro Area to remain intact, which is currently far from certain.

It says that the latest Greek crisis has revived doubts about whether the eurozone currency union can succeed without greater integration.

The NIESR also says that the slowdown in China may threaten its forecast, with official figures predicting growth of 7%.

Our forecast assumes a continuing, gradual slowing of growth as the economy makes a transition from a high-growth path to more moderate growth driven by consumption. Some recent developments have increased risks to this strategy. Consumer price inflation has slowed to 1.4 per cent, producer prices have been falling for more than three years; and the GDP deflator also fell in the first quarter. The authorities’ recent interventions in the equity market may not only discourage participation in the market, but also reduce confidence, more broadly, in the government’s market-oriented reform strategy.